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EQUITY RESEARCH
November 4, 2024 Flash Research
CARGOJET INC
Q3 First Pass: Core Revenue Outperforms Expectations
Key Takeaways: CJT reported an operationally in-line quarter, which we view
positively, with its core revenue coming in modestly ahead of expectations and the company noting that peak season demand remains robust across all
sectors. CJT is hosting a call on November 5 at 8:30 a.m. ET.
Q3 Recap: CJT reported healthy Q3 results. We highlight the following:
• Revenue excluding warrant amortization came in at $250MM, up from
$217MM the year prior, and versus our estimate of $254MM (consensus
$247MM). Total domestic, ACMI and all-in charter revenue was
$205MM, up from $178MM Y/Y and versus our estimate of $200MM.
Domestic and all-in charter came in above our estimate and ACMI was
broadly in line. CJT’s revenue saw a $4.4MM impact from amortization of
stock warrant contract assets. Reported revenue was $246MM.
• Adjusted EBITDA was $82MM, up from $70MM the year prior and versus
our estimate of $83MM (consensus $84MM). The company’s adjusted
EBITDA margin was 33.5%, versus 32.7% a year ago and our estimate
of 32.8% (consensus 33.9%). Note, CJT’s adjusted EBITDA margin
includes the impact of the amortization of stock warrants on revenue.
Reported EBITDA was $85MM, with the main adjustment related to
$6.5MM from the fair value adjustment on the warrant valuation and
amortization of stock warrant contract assets of $3.4MM.
• The company reported FCF (CFO less net capex) of $48MM versus
$30MM the prior year and versus our estimate of $26MM, with the main
variance from lower capex. Capex in the quarter was $52MM, consisting
of $30MM for maintenance and $22MM for growth.
Underlying Trends. CJT noted the following underlying trends:
• Domestic network revenue was $94MM, up from $89MM last year and
versus our estimate of $90MM. The company notes the Y/Y increase
was due primarily to an increase in e-commerce and B2B volumes
during the period, and contractual customers’ consumer price index
increases.
• ACMI revenue was $70MM versus $63MM last year and our estimate of
$71MM. The increase was primarily due to additional aircraft deployed
on a short-term basis, as well as an increase in ad hoc ACMI flights.
• All-in charter revenues were $42MM compared to $26M last year and
versus our estimate of $39MM. The Y/Y increase was due primarily to
the scheduled charter services between China and Canada, which
started during the current year, as well as an increase in ad hoc charters.
• Overall average cargo revenue per operating day was up 7.3% Y/Y to
$1.91MM/day. Block hours were up 14.9% Y/Y to 18,928 hours.
Operating Leverage Hampered By One-time Start-up Costs: We would note that CJT’s results were hampered by one-time start-up costs associated with the new Chinese e-commerce contract which contributed to the 15% Y/Y increase in block hours in Q3. The start-up costs have impacted maintenance, crew and ground-handling costs. This points to
earnings/margin upside as CJT moves past these expenses.
NCIB Update And Renewal: CJT purchased and cancelled ~0.3MM common shares under the current NCIB in Q3. CJT also announced that the TSX has accepted its notice to renew its NCIB. CJT intends to purchase up to 1,500,000 shares (representing ~9.46% of its outstanding shares) during the 12-month period commencing November 11, 2024 and ending November 10, 2025. Under its previous NCIB, which expires November 8, 2024, CJT
repurchased 1,351,335 shares for cancellation at a weighted-average price of ~$116.41 per share.
Conference Call Details: CJT is hosting a conference call on November 5 at 8:30 a.m. ET.
Dial-in numbers are 416-340-2217 or 1-800-806-5484 (passcode is 2447875#).